At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Atrion Corporation (NASDAQ:ATRI) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Atrion Corporation (NASDAQ:ATRI) going to take off soon? Hedge funds were in a pessimistic mood. The number of bullish hedge fund positions were trimmed by 3 in recent months. Our calculations also showed that ATRI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). ATRI was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. There were 15 hedge funds in our database with ATRI holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the latest hedge fund action encompassing Atrion Corporation (NASDAQ:ATRI).
How have hedgies been trading Atrion Corporation (NASDAQ:ATRI)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ATRI over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Atrion Corporation (NASDAQ:ATRI), with a stake worth $31.7 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $21.9 million. Citadel Investment Group, Millennium Management, and Marshall Wace LLP were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Atrion Corporation (NASDAQ:ATRI), around 0.51% of its 13F portfolio. Grisanti Brown & Partners is also relatively very bullish on the stock, designating 0.43 percent of its 13F equity portfolio to ATRI.
Judging by the fact that Atrion Corporation (NASDAQ:ATRI) has faced a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of fund managers that slashed their entire stakes last quarter. It’s worth mentioning that Phill Gross and Robert Atchinson’s Adage Capital Management sold off the biggest stake of the 750 funds watched by Insider Monkey, valued at about $5.6 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund cut about $1.8 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Atrion Corporation (NASDAQ:ATRI). We will take a look at Tri Pointe Group Inc (NYSE:TPH), Masonite International Corp (NYSE:DOOR), Grupo Simec S.A.B. de C.V. (NYSE:SIM), and Yext, Inc. (NYSE:YEXT). This group of stocks’ market valuations resemble ATRI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPH | 27 | 142074 | -5 |
| DOOR | 26 | 271479 | 5 |
| SIM | 1 | 1807 | 0 |
| YEXT | 9 | 18486 | -4 |
| Average | 15.75 | 108462 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $68 million in ATRI’s case. Tri Pointe Group Inc (NYSE:TPH) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 1 bullish hedge fund positions. Atrion Corporation (NASDAQ:ATRI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately ATRI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ATRI investors were disappointed as the stock returned -1.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
